US indices retest resistance zone; GDP matches forecasts

Summary:

• US final Q2 GDP meets expectations

• Inflation measure rise; business investment falls

• S&P500 retests H4 cloud

The US economy continues to grow at a relatively good clip according to the latest data. Being the third of three looks at US economic growth, the final GDP print rarely provides large market moving news, but it should not be discounted too readily nonetheless. For the 2nd quarter, the world’s largest economy grew 2.0% in annualised terms, as was widely expected and also in keeping with the prior read. 

The headline GDP read is fairly solid, but a notable drop in business investment is a potential warning sign. Source: XTB Macrobond 

While there wasn’t much doing with the headline, there were some notable developments under the hood with the components providing a more in-depth view of the economy. Individual noteworthy readings were as follows, listed by the final vs the 2nd reading:

Personal Consumption: +4.6% vs +4.7% 

Business Investment: -1.0% vs -0.6% 

Corporate profits: +3.7% vs +5.1%

Core PCE: +1.9% vs +1.7% 

The main two to highlight here are the fall in business investment, which was closest to its lowest level in a decade as well as the rise in core PCE. With the Fed currently easing policy against the backdrop of a fairly strong economy and solid labour market there are some concerns that this may lead to an inflationary pulse. A reading of 1.9% is still below the Fed’s target and far from an alarm bell, but this could be something to keep an eye on going forward.

US stocks remain in a broader consolidation towards the top of the range seen in the past month or so. Price is below the Ichimoku cloud on H4 for the first time this month but the lagging line is yet to confirm the break. The region up to 3012 could still offer some resistance while the 2945-2957 region is a potential support zone to watch if we turn lower once more. Source: xStation